Microeconomics
21st Edition
ISBN: 9781259915727
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Chapter 21, Problem 2RQ
To determine
Antitrust scheme and when the merger is permitted.
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A local magic shop has a monopoly on the production of magic wands. Each customer wants only one magic
wand, and the table below shows each customer's willingness to pay. The marginal cost of producing a wand is
$21 no matter how many are produced.
Quantity demanded
Price per wand ($)
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01 2 3 4 5
6 78
30 27 24 21 18 15 12 96
If the shop can charge only a single price, it will charge $
wands.
If the firm practices perfect price discrimination, it will sell a total of
earn a profit of $|
and sell
wands and
Question 1.Assume there are only two art auction companies who account for 100% of all the sales of 19thCentury impressionist master work paintings in the world. Assume that each company buys thiskind of painting and then resells the paintings at monthly auctions. Ignoring the question of anylaws that might apply, describe what economic arrangement would maximize the twocompanies’ total profits? Show with supply and demand curves what profit they would makefrom this arrangement and what societal welfare loss, if any, results from it.
10. Questionable business practices according to antitrust agencies
Complete the following table by indicating whether each of the scenarios describes the concept of tying, resale price maintenance, or predatory
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Televix is a firm that produces televisions. Suppose Televix sells its televisions to retail stores for $900
each and requires those retailers to charge customers at least $930 for each television.
Book Bound sells a wide variety of books to retail bookstores. Book Bound recently published two new
books: a popular mystery novel and a much less popular history book. Book Bound requires bookstores
to buy 15 copies of the history book for every 120 copies of the mystery novel ordered.
Coolaire is the only firm producing refrigerators. It costs $950 to produce a refrigerator, and Coolaire sells
each refrigerator for $1,200. After Chillbox, a new firm with the same costs as Coolaire, enters the
market for…
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